<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 1, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-9904
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ARDEN GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-3163136
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2020 SOUTH CENTRAL AVENUE, COMPTON, CALIFORNIA 90220
- ---------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 638-2842
----------------------
NO CHANGE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days. Yes X No
--- ---
The number of shares outstanding of the registrant's classes of common stock as
of April 1, 2000 was:
2,216,488 of Class A common stock
1,368,984 of Class B common stock
This report contains a total of 13 pages including exhibits.
<PAGE>
PART I. FINANCIAL INFORMATION
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
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CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In Thousands)
=============================================================================================================================
ASSETS April 1,2000 January 1, 2000
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 24,546 $ 18,157
Marketable securities 13,842 17,910
Accounts and notes receivable, net 4,703 5,412
Inventories 11,719 12,202
Other current assets 1,913 2,094
- -----------------------------------------------------------------------------------------------------------------------------
Total current assets 56,723 55,775
Property for resale or sublease 855 868
Property, plant and equipment, at cost, less accumulated
depreciation and amortization of $39,654 and $38,132,
respectively 50,728 51,366
Other assets 3,322 3,270
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Total assets $ 111,628 $ 111,279
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=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable, trade $ 12,906 $ 14,853
Other current liabilities 13,779 14,016
Current portion of long-term debt 2,099 2,229
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Total current liabilities 28,784 31,098
Long-term debt 7,898 8,322
Deferred income taxes 1,049 1,125
Other liabilities 1,469 1,458
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Total liabilities 39,200 42,003
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Commitments and contingent liabilities
Stockholders' equity:
Common stock, Class A 894 894
Common stock, Class B 342 342
Capital surplus 3,866 3,866
Notes receivable from officer/director (175) (175)
Unrealized loss on available-for-sale securities (357) (446)
Retained earnings 71,611 68,548
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76,181 73,029
Treasury stock, at cost (3,753) (3,753)
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Total stockholders' equity 72,428 69,276
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Total liabilities and stockholders' equity $ 111,628 $ 111,279
=============================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
2
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(In Thousands, Except Share and Per Share Data)
===============================================================================================================================
Thirteen Weeks Ended
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April 1, 2000 April 3, 1999
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<S> <C> <C>
Sales $ 86,445 $ 78,017
Cost of sales 50,543 46,506
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Gross profit 35,902 31,511
Delivery, selling, general and administrative expenses 30,720 26,690
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Operating income 5,182 4,821
Interest and dividend income 465 336
Other income (expense), net (267) (8)
Interest expense (211) (157)
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Income before income taxes 5,169 4,992
Income tax provision 2,106 2,034
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Net income $ 3,063 $ 2,958
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Other comprehensive income (loss), net of tax:
Unrealized gain (loss) from available-for-sale securities:
Unrealized holding losses arising during the period (80) (297)
Reclassification adjustment for losses included in net income 169
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Net unrealized gain (loss), net of income tax expense (benefit)
of $60 and $(200), respectively 89 (297)
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Comprehensive income $ 3,152 $ 2,661
========= =========
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Basic net income per common share:
Net income $ .85 $ .83
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Weighted average common shares outstanding 3,585,472 3,585,472
===============================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In Thousands)
===============================================================================================================================
Thirteen Weeks Ended
---------------------
April 1, 2000 April 3, 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 87,057 $ 78,963
Cash paid to suppliers and employees (83,175) (69,446)
Interest and dividends received 413 333
Interest paid (234) (202)
Income taxes paid (200) (779)
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Net cash provided by operating activities 3,861 8,869
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Cash flows from investing activities:
Capital expenditures (907) (2,029)
Purchases of available-for-sale securities (364) (135)
Sales of available-for-sale securities 4,329
Proceeds from the sale of property, plant and
equipment, liquor licenses and leasehold
interests 24 4
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Net cash provided by (used in) investing activities 3,082 (2,160)
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Cash flows from financing activities:
Principal payments on long-term debt (500) (308)
Principal payments under capital lease obligations (54) (62)
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Net cash used in financing activities (554) (370)
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Net increase in cash 6,389 6,339
Cash at beginning of period 18,157 13,647
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Cash at end of period $ 24,546 $ 19,986
===============================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
CONSOLIDATED STATEMENTS OF CASHFLOWS, Continued
<TABLE>
<CAPTION>
(In Thousands)
- --------------------------------------------------------------------------------------------------------------------------------
Thirteen Weeks Ended
---------------------
April 1, 2000 April 3, 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net income $ 3,063 $ 2,958
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,534 1,408
Provision for losses on accounts and
notes receivable 50 22
Deferred income taxes (192) (71)
Net gain from the disposal of property, plant
and equipment, liquor licenses and early lease
terminations (2)
Realized losses on marketable securities, net 259
Changes in assets and liabilities net of effects from investment and
financing activities:
(Increase) decrease in assets:
Accounts and notes receivable 659 920
Inventories 483 921
Other current assets 181 191
Other assets (52) (35)
Increase (decrease) in liabilities:
Accounts payable and other accrued expenses (2,192) 2,245
Deferred income taxes on unrealized (gains)/losses 57 200
Other liabilities 11 112
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 3,861 $ 8,869
===============================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Arden Group, Inc. (the "Company")
include the accounts of the Company and its direct and indirect
subsidiaries. Intercompany balances and transactions are eliminated.
The Company operates primarily in the supermarket business.
The accompanying consolidated financial statements for the three months
ended April 1, 2000 and April 3, 1999 have been prepared in accordance
with the instructions to Form 10-Q, Article 10 of Regulation S-X and
generally accepted accounting principles ("GAAP") for interim financial
information. These financial statements have not been audited by
independent public accountants but include all adjustments, which in the
opinion of management of the Company, are necessary for a fair
presentation of the financial position and the results of operations for
the periods presented. The accompanying consolidated balance sheet as of
January 1, 2000 has been derived from audited financial statements and,
accordingly, does not include all disclosures required by GAAP as
permitted by interim reporting requirements. The results of operations for
the three months ended April 1, 2000 are not necessarily indicative of the
results to be expected for the full year ending December 30, 2000.
2. MARKETABLE SECURITIES
Management determines the appropriate classification of its investments in
marketable securities at the time of purchase and reevaluates such
determination at each balance sheet date. Securities that are bought and
held principally for the purpose of selling them in the near term are
classified as trading securities and unrealized holding gains and losses
are included in earnings. Debt securities for which the Company does not
have the intent or ability to hold to maturity and equity securities are
classified as available-for-sale. Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of stockholders' equity.
3. NET INCOME PER COMMON SHARE
Basic net income per share is computed by dividing the net income
attributable to common stockholders by the weighted average number of
common shares outstanding during the period. The Company does not have any
dilutive shares for the periods presented in the statements of operations
and comprehensive income. The financial statements present basic net
income per share.
6
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
NOTES TO FINANCIAL STATEMENTS, Continued
4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement requires
that all derivative instruments be recorded on the balance sheet at their
fair value. Changes in the fair value of derivatives will be recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if
it is, the type of hedge transaction. The new rules will be effective the
first quarter of 2001. The Company does not believe that the new standard
will have any impact, as the Company currently holds no derivatives.
7
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER ANALYSIS
Net income in the first quarter of 2000 increased 3.5% to $3,063,000 compared to
$2,958,000 during the first quarter of 1999. Operating income was $5,182,000 in
2000 compared to $4,821,000 in the prior year.
Sales from the Company's 15 supermarkets (all of which are located in
Southern California) were $86,445,000 in the first quarter of 2000
representing an increase of 10.8% over the first quarter of 1999. The
majority of the sales increase is attributable to the opening of new stores
in Sherman Oaks and Santa Barbara, California in August and October 1999,
respectively. Same store sales increased slightly less than 1.0% in 2000
compared to the prior year. The first quarter of 1999 includes Easter and
Passover sales, which did not occur in 2000 until the second quarter.
The Company's gross profit as a percent of sales was 41.5% in the first quarter
of 2000 compared to 40.4% in the same period of 1999. Added controls over
product costs, product pricing decisions and increased buying and promotional
allowances contributed to the increase in margins.
Delivery, selling, general and administrative ("DSG&A") expense as a percent of
sales was 35.5% in the first quarter of 2000 compared to 34.2% in the first
quarter of 1999. An increase in promotions expense and benefits paid to union
employees contributed to the rise in DSG&A expense in 2000. In addition, 2000
expense as a percent of sales is higher due to the opening of two new Gelson's
Markets in late 1999, as described above.
Interest and dividend income was $465,000 in the first quarter of 2000 compared
to $336,000 for the same period in 1999 primarily due to higher average levels
of interest bearing investments in 2000.
Interest expense was $211,000 in the first quarter of 2000 compared to $157,000
in the first quarter of 1999 due to higher average levels of fixture financing
debt.
Other income (expense) in 2000 includes net losses on the sale of marketable
securities of $259,000.
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
requires that unrealized holding gains and losses for available-for-sale
securities be included as a component of stockholders' equity. Unrealized gains
on available-for-sale securities were $89,000 (net of income tax expense of
$60,000) in the first quarter of 2000 compared to unrealized losses of $297,000
(net of income tax benefits of $200,000) in the first quarter of 1999.
8
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, Continued
CAPITAL EXPENDITURES/LIQUIDITY
The Company plans to utilize cash-on-hand (including marketable securities) and
cash flow from operations to fund capital expenditures in 2000. The Company has
a $10,000,000 nonrevolving line of credit providing for term loans to finance
store fixtures and equipment under which no more borrowing capacity is
available. At the end of the first quarter of 2000, the outstanding borrowings
on the line totaled $6,142,000.
The Company also has two revolving lines of credit totaling $12,000,000. There
were no outstanding balances against either of the revolving lines as of April
1, 2000.
The Company has entered into agreements to open new Gelson's Markets in Irvine,
Pasadena and Beverly Hills, California. The Irvine store is anticipated to open
in the latter half of 2000, with the remaining stores beginning operations in
subsequent years. The development and actual openings of these markets are
subject to, among other things, necessary governmental approvals and the
developers fulfilling certain conditions.
YEAR 2000 ISSUE
The Company modified its systems to be Year 2000 ("Y2K") compliant, and as a
result, has not experienced significant Y2K problems. Computer software and
hardware used by the Company were modified or replaced to ensure Y2K readiness.
The Company believes that its significant vendors and service providers are Y2K
compliant and has not, to date, been made aware that any significant vendors or
service providers have experienced Y2K disruptions in their systems.
Accordingly, the Company does not anticipate additional material expenses or
operational disruptions as a result of any Y2K issues.
As of April 1, 2000, the Company has spent a total of approximately $672,000 in
connection with addressing the Y2K issue. These costs related primarily to the
use of internal staff and outside contractors to modify or replace existing
programs in order to achieve Y2K compliance. All costs were funded from
operating cash flow and, for the most part, were expensed as incurred.
Although unlikely, given that the Company has not experienced any Y2K problems
to date, there can be no certainty that any future unforeseen Y2K problem will
not adversely affect the Company's results of operations, liquidity or financial
position or adversely affect the Company's relationships with its customers,
suppliers, vendors or others.
9
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, Continued
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on debt.
The Company's exposure to interest rate risk relates to its $9,000,000 and
$3,000,000 revolving lines of credit. Borrowings under the agreements bear
interest at the bank's reference rate or the bank's adjusted LIBOR rate plus
.9%. There were no borrowings outstanding under either agreement during the
first quarter of 2000. A hypothetical 1% interest rate change would have no
impact on the Company's financial position or results of operations.
A change in market prices also exposes the Company to market risk related to its
investments in marketable securities. At April 1, 2000, the Company held
$13,842,000 in marketable securities. A hypothetical 10% drop in the market
value of these investments would result in a $1,384,000 unrealized loss and a
corresponding decrease in the fair value of these instruments. This hypothetical
drop would not affect cash flow and would not have an impact on earnings until
the Company sold the investments.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARDEN GROUP, INC.
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Registrant
Date MAY 10, 2000 DAVID M. OLIVER
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David M. Oliver
Chief Financial Officer
(Authorized Signatory)
11
<PAGE>
ARDEN GROUP, INC.
AND CONSOLIDATED SUBSIDIARY
INDEX TO EXHIBITS
-----------------
EXHIBIT
27. Financial Data Schedules.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> JAN-02-2000
<PERIOD-END> APR-01-2000
<CASH> 24,546
<SECURITIES> 13,842
<RECEIVABLES> 5,161
<ALLOWANCES> 458
<INVENTORY> 11,719
<CURRENT-ASSETS> 56,723
<PP&E> 90,382
<DEPRECIATION> 39,654
<TOTAL-ASSETS> 111,628
<CURRENT-LIABILITIES> 28,784
<BONDS> 7,898
0
0
<COMMON> 1,236
<OTHER-SE> 71,192
<TOTAL-LIABILITY-AND-EQUITY> 111,628
<SALES> 86,445
<TOTAL-REVENUES> 86,445
<CGS> 50,543
<TOTAL-COSTS> 50,543
<OTHER-EXPENSES> 30,670
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 211
<INCOME-PRETAX> 5,169
<INCOME-TAX> 2,106
<INCOME-CONTINUING> 3,063
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,063
<EPS-BASIC> .85
<EPS-DILUTED> .85
</TABLE>
